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  • Securities Financing Transaction Exposures (SFTs)

    • CA-15.3.13

      Traditional securitisations must be excluded by the originating bank if the securitisation meets the operational requirements for the recognition of risk transference set out in CA-6, Credit Risk Securitisation Framework. Banks meeting these conditions must include any retained securitisation exposure in the leverage ratio exposure.

      Added: October 2018

    • CA-15.3.14

      SFTs included in the exposure measure must be according to the treatment described in CA-15.3.19 below.

      Added: October 2018

    • CA-15.3.15

      For purpose of Paragraph CA-15.3.13, the treatment recognises that secured lending and borrowing in the form of SFTs is an important source of leverage, and ensures consistent international implementation by providing a common measure for dealing with the main differences in the operative accounting frameworks.

      Added: October 2018

    • CA-15.3.16

      For SFT assets subject to novation and cleared through Qualifying Central Counterparties, "gross SFT assets recognised for accounting purposes" are replaced by the final contractual exposure, given that pre-existing contracts have been replaced by new legal obligations through the novation process.

      Added: October 2018

    • CA-15.3.17

      Gross SFT assets must not recognise any accounting netting of cash payables against cash receivables.

      Added: October 2018

    • CA-15.3.18

      Bahraini conventional bank licensees and supervisors should be particularly vigilant to transactions and structures that have the result of inadequately capturing banks' sources of leverage. Examples of concerns that might arise in such leverage ratio exposure measure minimising transactions and structures may include: securities financing transactions where exposure to the counterparty increases as the counterparty's credit quality decreases or securities financing transactions in which the credit quality of the counterparty is positively correlated with the value of the securities received in the transaction (i.e. the credit quality of the counterparty falls when the value of the securities falls); banks that normally act as principal but adopt an agency model to transact in derivatives and SFTs in order to benefit from the more favourable treatment permitted for agency transactions under the leverage ratio framework; collateral swap trades structured to mitigate inclusion in the leverage ratio exposure measure; or use of structures to move assets off the balance sheet. This list of examples is by no means exhaustive. Where supervisors are concerned that such transactions are not adequately captured in the leverage ratio exposure measure or may lead to a potentially destabilising deleveraging process, they should carefully scrutinise these transactions and consider a range of actions to address such concerns. Supervisory actions may include requiring enhancements in banks' management of leverage, imposing operational requirements (e.g. additional reporting to supervisors) and/or requiring that the relevant exposure is adequately capitalised through a Pillar 2 capital charge. These examples of supervisory actions are merely indicative and by no means exhaustive.

      Added: October 2018